Your complete guide to budgeting

Here's everything you need to know about how to make a personal or household budget

  • What budgeting is and why it’s important
  • Creating a workable budget plan
  • Tips for sticking to your budget

What brings you here?

If you’re reading this guide, chances are you want to get ahead financially. You might have a savings goal in mind, such as a holiday or house deposit. Or perhaps you want to pay down your debts faster, break the cycle of week-to-week living or simply improve your financial fitness. These are all great reasons to start budgeting.

As you read this information, please keep in mind that there are no one-size-fits-all solutions when it comes to money, which is why this resource is provided for general purposes only. If you would like to speak with a budgeting specialist about a customised budgeting plan, please contact us to arrange a free, no-obligation discussion.

Where did you learn your money skills?

Dealing with money is a fact of life, yet managing money is rarely taught at school. Instead, most of us learn our financial skills from our family and peers. It’s little wonder, then, that less than 10 percent of Australians say they have a budget to help with their finances.

Not to mention that life is hectic. Most people are so busy working and earning money that it leaves little time to manage it properly. If you’re like the majority of Australians, you’re working hard to pay bills and debts, saving what you can and generally juggling to make ends meet.

But the fact you’re reading this page suggests that you don’t want to follow the majority. It’s time to learn new money skills and power ahead!

Are you doing the most with your money?

You wouldn’t start building a house without a plan. Nor would you set out on a long trip without a map. Yet the majority of people have no plan for their money, despite that money is an essential resource for achieving economic security.

It’s a fact that if you were to ask the average person on the street their exact financial position, they might only be able to tell you their next pay date and some bills they have to soon pay. This is because very few people have a clear and complete picture of their finances. Very few people, for instance, could tell you exactly how much interest they’re paying annually or what their savings projection is in 12 months’ time.

Yet most people know enough to admit they could be using their money more effectively. It’s not uncommon to hear people lament over how much they spend on interest fees or late charges, or how they could save money at the supermarket with better planning or be able to afford a holiday if their spending was under control.

Budgeting brings control and visibility

Imagine… Instead of being surprised when an annual bill arrives (e.g. car registration), you are expecting it and already have the money set aside.

Imagine… Rather than relying on your credit card to cover unforeseen expenses (e.g. car repairs), you have a savings safety net.

Imagine… You could model different scenarios to see when a new purchase (eg. new television) would be affordable or how much you could save in a year by adjusting your spending habits.

All of these things, and more, are ways in which budgeting can give you control and visibility over your finances.

Budgeting myth: “budgeting is for poor people”

It’s a common misconception that budgeting is a strategy to help low-income earners make ends meet. Nothing could be further from the truth. Budgeting is a wealth creation and financial fitness tool that applies to all people, at all income levels, from those on government benefits to self-employed billionaires.

A budget is a workout plan for your money

Most people understand that the key to getting physically fit is to create a fitness routine consisting of daily exercise and good nutrition, and having a plan helps to ensure that you stay motivated towards your goals and stay on track.

A budget is the same, except it’s a fitness plan for your money.

Like any good fitness plan, a budget provides:

  • Structure and discipline that guides healthy, financial habits and choices on a daily basis.
  • A clear path to your financial goals, which can include fast-tracking to achieve your goals sooner.
  • Motivation as you watch your efforts add up (e.g. debts going down, savings going up, bills being paid on time.)

A budget lets you look at your finances from different angles

Have you heard the story about the truck that got stuck in a tunnel and the little girl who helped to free it? The story goes that a truck got jammed when it tried to drive into a tunnel that was a few inches too low for it. A group of emergency workers and engineers were arguing over how to dislodge the vehicle using the various tools and equipment they had on hand. Luckily, one of them overheard a little girl, who watching the action, turned and said to her mother, “Why don’t they let some air out of the tyres?”

The moral of the story is that there’s usually more than one way to solve a problem. Looking at it from different angles will tend to produce different solutions. Money problems are no different. Like the truck in the story, you may also feel stuck. You may think that you’ll never have spare money to save or be able to live debt-free.

But once you have a budget in place, you’ll be able to look at your finances from different angles. A budget gives you the power to model “what if” scenarios. For example, “What if I paid off an extra $20 a week from my credit card? How soon would it be paid off? How much interest and time would that save me?”

Until they start budgeting, many people don’t realise how small changes can make a big difference over time.

Case Study: Surprised by How Much They Could Save

Rob and Helen decided to get serious about saving when they were invited to a friend’s overseas wedding. Despite the fact they both had good incomes, they were never able to save more than a few thousand dollars.

The first step was to create a budget and see how much, if anything, they could afford to save. They gathered together all of their bills and bank statements for the last few months and used that information to create a budget that included their incomes, as well as their rent, household, car and personal expenses.

Rob and Helen were amazed to see that their budget showed a positive balance of $18,000 over 12 months! So why did they have so little in savings?

The budget also revealed that Rob and Helen were spending nearly $15,000 a year on “little” discretionary expenses. They both bought coffee and lunch every day and often stopped for takeaway food instead of cooking at home.

Now that they could see where their money was going, Rob and Helen were quick to change some of their spending habits. Instead of buying lunch, they started taking leftovers from home. They invested in a coffee machine and started meal planning. As a result, they quickly saved the money they needed for their friend’s wedding and kept saving towards a wedding of their own.


Budgeting myth: “Budgeting doesn’t work. I’ve tried it.”

When most people create a budget, they create a short-term budget based on their pay period. Unfortunately, this method often fails to account for all of the expenses that occur across the entire year. A workable budget will detail your finances over your pay period and the entire year ahead. It will also be flexible and adaptable to change. This is one of the reasons that MyBudget’s budgeting system is so powerful and effective.

How to make a budget

A budget can be as simple as numbers scrawled on the back of a napkin or, as in the case of MyBudget, a world class money management platform. MyBudget clients have the benefit of a dynamic budgeting system that prioritizes their payments, pays their bills and loans on time, sets aside savings and adjusts to new expenses and income. Our platform also provides powerful reporting so that the user has a live, 360-degree view of their finances from the convenience of an app on their smartphone. MyBudget clients can make changes to their budget and see their future payments and projections update instantly.

If you’re making a budget at home, it’s more likely that you’ll create your budget on paper or using a spreadsheet application, such as Microsoft Excel. Either way, setting aside an hour to create a personal or household budget is a great investment.


Step 1

Pull together your financial information

Before you begin creating your budget, the first step is to gather together your bank, loan and credit card statements, bills, receipts and pay slips for the last few months. The information you collate will be used to populate your budget. Don’t forget to include bills and expenses that occur less frequently, such as vehicle registration, council rates and Christmas expenses.


Step 2

Create a budget spreadsheet

We suggest that you base your initial budget on a four-week period or the same period as your pay. Group your income and expenses for that period into the following categories:

  • Income (earned wages, Centrelink, child support, dividends, annuity payments etc.)
  • Housing (mortgage, rent or board)
  • Other loans (credit/store cards, personal loan, car loan, interest-free repayments)
  • Utilities and rates (electricity, gas, water, council rates)
  • Telephone and TV (mobile phone, internet, pay TV etc.)
  • Insurance and financial (home and contents, health, car etc.)
  • Groceries (food, drink and household supplies etc.)
  • Medical (prescriptions, doctor’s appointments etc.)
  • Transport (bus/train tickets, petrol)
  • Car and auto (registration and servicing)
  • Children (school fees, uniforms, classes, child support etc.)
  • Special events and birthdays (Christmas, Easter, school holidays etc.)
  • Entertainment and eating out (don’t forget coffees and work lunches)
  • Other discretionary (clothes and gadget shopping, alcohol, cigarettes etc.)

Create a separate row for each category. Use the financial information you collated in Step 1 to add up and allocate spending amounts to the appropriate category.

Download our free Budget Template

Step 3

Add up the totals and calculate your budget surplus or deficit

It’s now time to add up all of your income and expenses. Which total is higher: money coming in (income) or money going out (expenses)? If your income is higher than your expenses, you have a budget surplus. Congratulations! You’re off to a great start. There may be areas where you can find even more money to save or pay down debts faster.


If your expenses are higher than your income, it means that your budget is in deficit. The good news, however, is that you now have a budget plan to help you analyse your spending. Review your budget to identify those categories that are eating into your income. It’s not uncommon, for example, for people to discover that they have enough income over the year to meet their commitments and save, but that they need help with getting ahead of their bills.


Step 4

Create a budget plan to achieve your financial goals

As well as helping you to manage your spending, a budget plan can help by mapping out a path to your financial goals. Your budget surplus will show you how much you can afford to set aside. So now, create a category in your budget spreadsheet for Savings Goals.


Want to know more about how to budget and save? 

Read MyBudget’s Ultimate Guide to Saving Money

What about quarterly and annual expenses?

Many expenses will not occur in sync with your pay periods—for example, utility bills occur every three months, and car registration and council rates pop up once or twice a year. These expenses will need to be distributed across multiple pay periods so that money to pay them is set aside before the bills fall due. This is why, as well as creating a pay-period budget, it’s important to create a 12-month budget that incorporates all of your income and expenses over the entire year.

What if your budget won’t balance?

Sometimes, a budget won’t balance no matter what way you look at it— there are more expenses than income, month-to-month and for the foreseeable future. There can be a number of causes for this or a combination, such as a sudden or gradual change in income, large, unexpected bills, unmanageable debt or chronic overspending that has led to a cash crisis.

Please be assured: there is always a solution. In our long experience helping people, we’ve never encountered a money problem that can’t be fixed.

A budget that won’t balance may be an indication to talk with your creditors (the people you owe money) about payment terms that are more affordable. Most creditors are pleased to talk with debtors who demonstrate they have a workable plan in place and are earnest about meeting their financial commitments. Armed with a budget that shows what sorts of terms are affordable, you may be able to propose a break from payments while you get back on your feet, an instalment plan or payment extension.

Feel stressed about talking to your creditors? Put a stop to creditors and collectors contacting you. MyBudget may be able to talk to your creditors for you.

How to keep your budget on track

Creating a budget plan is just the beginning. The next important step is sticking to it! Here are some tips that make sticking to a budget easier.

  • Use cash instead of cards

    Withdraw cash for your budgeted living expenses (e.g. groceries, petrol etc.) from the bank once a week. Cash is a visual reminder of your budget, whereas debit and credit cards make it easier to overspend.

  • Plan your meals in advance

    Create a weekly meal plan and shopping list so that you only need to visit the shops once a week. The less contact you have with shopping centres, the less likely you are to overspend.

  • Write down your financial goals

    Writing down your financial goals goes a long way towards achieving them and working them into your budget goes the extra mile towards success.

  • Open a separate bank account for your savings

    Transfer your savings money into a dedicated savings account either as a pay disbursement or an auto-transfer from your everyday account. The key is to ensure that the money never touches your pocket. Plus, you can enjoy watching your savings balance grow over time!

  • Grow your savings safety net

    Your goal should be to have around three months’ worth of cash reserves in the bank set aside for “rainy days” or unexpected bills. You can grow your savings safety net over time or build it up quickly by saving your tax return, bonuses or overtime payments.

  • Review your budget regularly

    Because your finances are always changing — new expenses will come up or your income may fluctuate — your budget will need to be dynamic too. Make time to review and adjust your budget weekly.

  • Focus on positive, daily money habits

    Financial fitness is not achieved by looking at your bank statement once a month. It’s the sum of your daily money habits and weekly routines. It’s taking your lunch to work instead of buying it. It’s skipping after-work drinks because you’re saving for a holiday. It’s creating and sticking to financial priorities that ensure you live the debt-free, stress-free life you desire!

  • Further information

    To find out more about personal budgeting and to get your free customised 12-month budget plan prepared for you by a caring money management expert, contact MyBudget today to book your FREE consultation.


Ready to find out more?

Get Started